Latimer Hinks Solicitors in Darlington has reacted to chancellor Rishi Sunak’s first budget, and what the implications will be for local people and businesses.
The statement included a range of other headline-grabbing figures as he outlined a post-austerity spending plan that included big budgets for everything from the NHS and housing to research and development.
In a budget designed to secure economic stability in the face of the huge uncertainty surrounding the coronavirus, and following a Bank of England reduction in the base rate earlier in the day, the chancellor’s plan is expected to increase borrowing by £3.1 billion on average from 2020-21 onwards.
Plans include an increase to the threshold before National Insurance contributions are deducted, to £9500 from next month and the promise of the living wage rising to £10.50 per hour by 2024.
Also confirmed was a set of measures to cushion the impact of coronavirus on business, with retail, leisure and hospitality companies occupying premises with a rateable value of less than £51,000 receiving a rates holiday for the coming year.
As predicted, there was a reduction in the lifetime allowance on gains eligible for Entrepreneurs’ Relief which provides a reduced 10 percent rate of Capital Gains Tax on qualifying disposals. From Wednesday, the lifetime limit will be reduced from £10 million to £1 million per person.
Another widely expected income-generating measure was the chancellor’s announcement of a 2 percent surcharge in Stamp Duty Land Tax (SDLT) for non-resident purchasers of property, a move that will hit UK expats living and working overseas as well as foreign investors.
Many of the imminent tax changes were announced in previous Budget statements, including those affecting Capital Gains Tax on property disposals, which has seen incremental changes to lettings relief and final period exemptions for those who sell homes that are not fully eligible for Private Residence Relief. This affects anyone completing a property sale after 5 April this year for any property which has at some time been their principal private residence.
Another is the final stage of the incremental introduction of changes to landlords with buy-to-let mortgages. From April 2020, landlords who own rental properties in their own names will no longer be able to deduct any mortgage interest or other finance-related costs from their rental income before calculating their tax liability, a process which previously benefited higher rate taxpayers. The tax relief has now been replaced by a 20 percent tax credit for finance-related costs.
Elizabeth Armstrong, managing director of Latimer Hinks Solicitors, said: “This is being reported as a budget designed to please those who voted for the government in the recent election. The big spending increases appear to follow the election promises that were made and it was reassuring that the threat of the coronavirus was made centre stage.
“There were though some surprises, for example, an anticipated announcement regarding Inheritance Tax reforms following recent consultations didn’t happen. This, together with the shift in Entrepreneurs’ Relief and Capital Gains Tax on property make forward planning an increasing priority not just for the wealthy but also for homeowners and business owners alike if they wish to protect their pensions and inheritance for the next generation.
“Anyone planning to sell their business in the next few years should certainly be working with their advisers to look at ways of extracting value prior to sale, such as through increased employer pension provision.
“For individuals, long term planning for asset transfer may be on the agenda or considering whether using trusts could be helpful.”